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Colonial Influence and Urban Transformation: The Role of Western Concessions in Shaping Shanghai’s Development as a Global Financial Hub
The Bund, Shanghai 1930
Shanghai’s transformation into a global financial hub during the treaty port era, spanning from 1842 to 1943, represents a profound intersection of growth and subjugation. The establishment of foreign concessions in Shanghai catalyzed the city’s rise. Once a small fishing village, Shanghai was introduced to international trade practices, financial networks and urban planning strategies that positioned it into an indispensable node in the global markets. The concessions, while fostered economic activity and modernization, institutionalized spatial segregation and social exclusion, privileged foreign settlers at the cost of Chinese sovereignty (Fraser, 1939; Taylor, 2002).
The foundation for these changes was laid by the Treaty of Nanking in 1842, signed at the conclusion of the First Opium War. The treaty was widely regarded as the first of the “unequal treaties,” opening Shanghai and other ports to foreign trade, granted extraterritorial rights to British citizens, and imposed fixed tariffs that curtailed China’s autonomy (Oxford Public International Law, n.d.; Liu, 2014). These stipulations created new zones of foreign influence, where Western powers exerted control through legal, economic, and urban mechanisms (Bickers, 1998).
Shanghai’s concessions became arenas of competing imperial ambitions and local resistance, becoming a symbol of colonial exploitation and an epicenter of global finance. The socio-economic and spatial disparities entrenched during this period persisted until 1949, following the victory of the Chinese Communist Party (CCP), which marked the end of foreign concessions and the restoration of Chinese sovereignty (Fraser, 1939).
This research explores the dual-edged legacy of this period, examining how the convergence of colonial governance, economic innovation, and social stratification defined Shanghai’s development and left a lasting imprint on its urban and cultural landscape. Specifically, this paper seeks to address the research question: How did the establishment and governance of Western concessions in Shanghai between 1842 and 1949 contribute to its growth into an international financial center, and what were the impacts on the city’s socio-economic and spatial structure?
Historical Context of Western Concessions in Shanghai
Background of the Treaty of Nanking
Signed on August 29, 1842, the Treaty of Nanking concluded the First Opium war and ushered in a pivotal moment in Sino-British relations. As one of the first “unequal treaties,” it required China to cede the island of Hong Kong to Britain in perpetuity, and opened five major ports—Canton, Amoy, Foochow, Ningpo, and Shanghai—to British trade and residence, granting foreign merchants direct access to Chinese markets (Oxford Public International Law, n.d.; Liu, 2014). These provisions significantly redefined China’s economic and territorial autonomy, establishing a framework for foreign repression (Fraser, 1939).
Economically, the treaty introduced fixed tariffs, stripping China of its ability to regulate its own trade policies and creating an unbalanced dynamic favoring British interests (Oxford Public International Law, n.d.). China was further obligated to pay an indemnity of 21 million silver dollars, covering war costs, compensation for destroyed opium and debts owed to British merchants (US-China Institute, n.d.). While Britain portrayed the treaty as introducing “civilized” diplomatic practices to a “barbaric” empire, the reality was starkly unequal. The agreement granted extraterritorial rights to British citizens in treaty ports and solidified Britain’s most-favored-nation status. These measures eroded China’s sovereignty and invited further foreign exploitation (Bickers, 1998).
The Treaty of Nanking imposed a regime of imperial international law that prioritized Britain’s commercial and maritime interests while reducing China to a lesser, unequal partner (Liu, 2014). Such exploitative constraints on sovereignty were rarely, if ever, imposed on European or Western states. The dehumanization of the Chinese people during this period is evident in the writings of Julia Corner, a British commentator, who wrote “The population [of Canton] is perverse, presumptuous, turbulent, and altogether the most indocile and the worst people in China.” Corner expressed frustration that “those who managed the war and the treaty” had not sufficiently subjugated China, encapsulating the pervasive entitlement of imperialists during this era (Corner, as cited in Fraser, 1939).
The Treaty of Nanking represented a turning point in Chinese history, institutionalizing foreign dominance and establishing a precedent for subsequent treaties that deepened oppression in China during its “century of humiliation” (Taylor, 2002). It also entrenched the division of Chinese cities into treaty ports and concessions, building systemic socio-economic and spatial inequalities that would influence the country’s trajectory for decades to come.
Creation of the International Settlements and Concessions
Administrative & Social Structure
The creation of the International Settlements and Concessions in Shanghai was a transformative moment in the city’s history, introducing foreign-controlled enclaves that significantly influenced its development. The British founded their settlement in 1845, followed by the Americans in 1848. By 1863, these two settlements merged to form the International Settlement to consolidate their resources amidst local instability (Fraser, 1939; Bickers, 1998).
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Governed by the Shanghai Municipal Council (SMC), the International Settlement operated land regulations agreed upon by foreign representatives and local Chinese officials. Nevertheless, the SMC was overwhelmingly dominated by foreign interests, and excluded the Chinese majority from meaningful governance (Fraser, 1939). The settlement’s institutions reflected the extraterritorial privileges granted to foreign powers, which solidified a system of socio-economic and spatial segregation. Laws within the settlements were catered to serve foreign interests, marginalizing the local population and undermining Chinese sovereignty (Bickers, 1998).
The International Settlement embodied Western imperial influence through its governance structure, economic policies and urban planning (Fraser, 1939; Bickers, 1998). Its self-governing nature enabled foreign powers to exert significant control over Shanghai’s development, while disregarding the growing inequalities and tensions between foreign and local communities. This intricate dynamic left an enduring legacy of the city’s urban and socio-political landscape.
The early administrative and social structure of Shanghai’s International Settlements and concessions was defined by foreign dominance and exclusionary policies. Although the SMC was officially tasked with managing municipal affairs such as sanitation, policing and infrastructure, its composition favored British and other foreign nationals, effectively sidelining the Chinese majority (Fraser, 1939; Bickers, 1998).
The legal framework of the concessions was rooted in extraterritoriality, which exempted foreign residents from Chinese law and placed them under the jurisdiction of their respective nations. This system enabled the settlements to maintain political autonomy and consolidated the control of foreign elites (Mou, 2015; Liu, 2014). Socially, the concessions fortified rigid racial and cultural hierarchies. Western settlers viewed themselves as superior, relegating Chinese laborers to subservient roles and restricting access to settlement amenities (Bickers, 1998).
British settlers, also known as “Shanghailanders,” cultivated a distinct identity and emphasized their cultural and racial separation from the local Chinese population. As historian Robert Bickers notes, “The Shanghailander position, like the British position in China generally, was underpinned by prevailing notions of ‘Orientals,’ and Chinese, as ‘racially’ different and ‘racially’ unequal. These ideas were widely believed and propagated” (Bickers, 1998, p. 165). This identity came from their roles as administrators, merchants and investors who wielded significant economic and political entitlement within Shanghai’s foreign-controlled enclaves. Additionally, Western settlers fostered exclusive communities, through social clubs, educational institutions, and cultural events that maintained a sense of “home” abroad (Fraser, 1939; Taylor, 2002).
This identity, however, was not static but adapted to external circumstances. This can be seen from the challenges to British supremacy during periods of political instability like Taiping Rebellion or the Japanese occupation (Liu, 2014). In these moments, the British emphasized their role as stabilizers and protectors of Shanghai’s “modernity” (Fraser, 1939; Mou, 2015). These self-serving narratives augmented their perception of themselves as indispensable to the city’s order. The administrative structure of the SMC and the broader social dynamics it governed perpetuated spatial segregation and economic disparity, dividing Shanghai’s urban landscape and contributing to the tensions that define its treaty port era (Bickers, 1998; Fraser, 1939).
Extension of the Foreign Concessions in Shanghai 1846-1914
Economic Development and Shanghai’s Role as a Global Financial Center
Role of Foreign Enterprises
Foreign enterprises, particularly Jardine Matheson and the Hong Kong and Shanghai Banking Corporation (HSBC), were pivotal in shaping Shanghai’s economic development (Bickers, 1998; Mou, 2015). Foreign companies capitalized on the concessions’ legal and commercial advantages, becoming central actors in transforming the city into a global financial hub. Jardine Matheson played a foundational role in trade, especially in opium, establishing itself as one of the earliest and most influential foreign firms in Shanghai. Its operations reflected the dependence of the treaty port economy on foreign capital and trade expertise (Liu, 2014; Taylor, 2002).
HSBC, established in 1865, emerged as a financial cornerstone for the city’s economic activities. Its ability to offer loans, manage foreign exchange, and facilitate international trade positioned it as a vital institution within the financial framework of Shanghai. This institution not only supported the operations of foreign enterprises, but also controlled significant economic levers within the city, further importing the influence of Western capital (Horesh, 2007).
Other foreign enterprises, such as Butterfield & Swire and E.D. Sassoon & Co., contributed to the treaty port economy, diversifying into industries like shipping, textiles and petroleum (Connell, 2003; Chen, 2001). These firms not only advanced Western Commercial interests but also built economic dominance through control over critical industries and infrastructure.
The historical operations of Jardine Matheson, HSBC and similar enterprises reveal systemic exploitation and discriminatory practices that perpetuated the subordinate status of the Chinese people (Bickers, 1998; Connell, 2003). Jardine Matheson’s notorious involvement in the opium trade, which inflicted widespread harm on Chinese society, is one of the most infamous examples of this exploitation. Their lobbying efforts influenced British government actions, such as initiating the Opium Wars, deepening the wounds of China’s “century of humiliation” (Fraser, 1939).
Additionally, the financial practices of these enterprises favored foreign dominance. HSBC played a central role in financing trade and infrastructure projects, but it predominantly served the interests of foreign merchants and governments. These companies provided loans at high-interest rates to the Chinese government, often secured against customs revenue, further consolidating foreign economic control and increasing China’s financial dependence on external powers (Horesh, 2007; Mou, 2015).
Contributions of the Financial Sector
Foreign enterprises played a critical role in Shanghai’s development as a global financial hub during the treaty port era. This growth was driven largely by the dominance of foreign institutions, particularly banks like HSBC, which served as a primary financial conduit for British enterprises and international firms operating in Shanghai. HSBC facilitated both local and global transactions, establishing its influence over Shanghai's financial framework, a legacy that endures to this day (Horesh, 2007).
HSBC’s operations extended beyond trade facilitation to funding large-scale infrastructure projects in transportation and real estate. In collaboration with Jardine Matheson through the British and Chinese Corporation, the bank financed key railway projects such as the Shanghai-Nanking and Tientsin-Pukow railways. These ventures were instrumental in integrating Shanghai into the broader Chinese economy while simultaneously cementing the dominance of foreign capital in critical sectors (Connell, 2003; Mou, 2015).
Other financial entities, such as the Imperial Bank of China and various Western trading houses, also contributed to the city’s financial landscape. These institutions established a framework of banking and credit systems that prioritized the needs of foreign merchants and enterprises, often at the expense of local Chinese businesses. Loans and financial services were frequently offered on terms that heavily favored foreign control, assuring their influence over sectors like shipping, manufacturing and real estate (Chen, 2001; Fraser, 1939).
The financial, while facilitating economic growth, also strengthened the socio-economic hierarchies of the treaty port system. Foreign financial institutions operated under extraterritorial privileges, exempting them from Chinese interests and enabling them to dictate the terms of economic engagement. This created a dual financial system where foreign enterprises thrived under favorable conditions, while Chinese businesses were marginalized and excluded from accessing capital and opportunities (Bickers, 1998; Mou, 2015).
Monetary Fragmentation and Financial Networks in Shanghai
The monetary and financial landscape of Shanghai during the treaty port era was characterized by significant fragmentation and the growing dominance of foreign banking networks. As a treaty port, Shanghai’s emerging role as a financial hub distinguished it from other regions in China, yet its fragmented monetary system posed challenges to economic integration and trade. Various currencies circulated during this period, including Chinese copper coinage, silver dollars and foreign banknotes, each were confined to specific regions or cities. This disjointed system created inefficiencies and eroded trust in monetary transactions, hindering the flow of trade and investment across the country (Horesh, 2007).
Foreign banks like HSBC and Chartered Bank, based in Shanghai, navigated this complex monetary environment by adapting their operations to introduce greater stability. The circulation of foreign banknotes within urban areas brought a measure of monetary reliability, though these notes remained inaccessible. This integration catalyzed Shanghai’s entry into the global financial markets, with foreign banks introducing financial practices that supported trade and investment (Connell, 2003; Mou, 2015). Leveraging Shanghai’s strategic location as a gateway to China’s wealthiest provinces, these institutions dominated local financial operations, stabilizing monetary transactions, as well as reshaping the financial ecosystem to prioritize
Despite increasing Shanghai’s role as a central node in global trade and finance, these developments came at the cost of deepening socio-economic divides, both within the city and between treaty ports and the rest of China. This period’s progress reflected a lasting legacy on Shanghai’s identity as a global financial hub (Horesh, 2007; Mou, 2015).
Socio-Economic Impacts and Spatial Segregation
Economic and Political Influence of Western Settlers
The economic and political influence of Western settlers in Shanghai was profound, penetrating into the city’s governance and urban development during the treaty port era. Institutions like the SMC functioned as mechanisms of foreign dominance, granting settlers administrative authority while excluding the Chinese majority. This exclusion created a stark political hierarchy that ensured the interests of Western residents above those of the local population (Fraser, 1939; Mou, 2015).
Western settlers leveraged their political power to consolidate their economic control, dictating Shanghai’s financial and commercial sectors. Key industries were monopolized by foreign enterprises, with urban planning and taxation systems regularly manipulated to maximize profitability. This dominance was bolstered through systems such as the French cadastre system in the French Concession. Inspired by the Napoleonic cadastre of 1811, this system was adapted to formalize land ownership and taxation in Shanghai (see Figure 2). The cadastre empowered French municipal authorities to exert control over land management, levy taxes, facilitate urban development projects, and secure prime real estate for foreign settlers. However, it disproportionately served foreign interests, marginalizing Chinese landowners and residents through unfair taxation and displacement (Mou, 2015; Liu, 2014).
The cadastre system also reinforced spatial segregation, reserving the most desirable urban spaces for foreign settlers while relegating Chinese communities to under-resourced areas. This legal and administrative framework exemplifies how Western settlers leveraged political and legal mechanisms to solidify their authority over Shanghai’s urban landscape. This dual consolidation of economic and political power perpetuated socio-economic inequalities, exacerbating the divide between foreign settlers and the local Chinese population and leaving a lasting imprint on the city’s development (Bickers, 1998; Fraser, 1939; Mou, 2015).
French Concession Cadastral Map, 1900
Social Exclusion
Social exclusion was another defining feature of the socio-political and spatial dynamics within the International Settlements and concessions. Western settlers cultivated an environment that systematically marginalized the local Chinese population, fostering rigid racial and cultural hierarchies. These hierarchies were institutionalized through governance, urban planning, and cultural practices that prioritized foreign interests and relegated the Chinese. Chinese residents were often confined to subservient roles in labor, commerce, and services, while Western settlers kept their control over lucrative industries and administrative power (Fraser, 1939; Bickers, 1998).
Spatial segregation was a critical tool for continuing social exclusion. The concessions were designed to reflect Western standards of living, with well-maintained infrastructure and exclusive amenities reserved for foreign residents. The Bund, a symbol of Western commercial and architectural dominance, embodied this divide, with its grand buildings and promenades inaccessible to the majority of the local population. Even recreational spaces in the settlements were tailored to the needs of the foreign elite, further amplifying the physical and symbolic separation between the two communities (Taylor, 2002; Liu, 2014).
This systemic social exclusion not only marginalized the local population but also deepened socio-economic inequalities and tensions. The legacy of these exclusionary practices contributed to enduring disparities in power and resources, leaving a profound impact on the city’s social and urban space (Mou, 2015; Bickers, 1998).
Shanghai vs the British Settlement
Power/Knowledge and the Mechanisms of Control in Colonial Shanghai
Michel Foucault’s theory of power/knowledge provides a valuable lens through which to analyze the socio-economic structure of Shanghai during the treaty port era (Schneck, 1987). Western settlers in Shanghai maintained control not only through overt governance but also through the systemic legitimization of their dominance and the marginalization of the local Chinese population.
Institutions like the SMC are not merely political bodies but also sites of knowledge production, where the authority of the ruling class was normalized through policies, urban planning, and legal frameworks. These systems constructed a reality in which the exclusion and exploitation of the Chinese population appeared justified and necessary, effectively silencing resistance by framing it as deviance (Guédon, 1977).
Foucault’s conception of biopower, the regulation of populations through subtle mechanisms of control, is evident in the spatial segregation and labor exploitation within the concessions. For instance, the cadastre system in the French Concession formalized land ownership in a way that prioritized foreign interests, embedding racial and economic hierarchies into the city’s physical and legal fabric. This systemic spatial organization not only dictated access to prime urban spaces but also perpetuated the perception of Chinese inferiority (Matza, 1966).
Cultural and social exclusion within the settlements was supported by discursive practices that characterized the Chinese as unworthy or incapable of self-governance. These exclusions were not only physical but also epistemological, as settlers generated narratives of Western superiority that justified their dominance. This aligns with Foucault’s argument that power operates through the production of knowledge, shaping societal norms and perceptions to sustain control (Schneck, 1987).
The legacy of these practices reflects Foucault’s assertion that power is deeply embedded in societal structures and continues to influence contemporary realities. By applying his theory, the systemic inequalities of Shanghai’s treaty port era were logical and justified, leaving enduring socio-economic and spatial divisions that defined the city's development and identity (Guédon, 1977).
Architectural and Urban Planning Influence
Notable Landmarks
The architectural and urban planning influence in Shanghai was epitomized by notable landmarks that symbolized the city’s socio-economic transformations under Western dominance (Huebner, 1989). The Bund, a prominent waterfront area along the Huangpu River, became an architectural parade ground for foreign powers. Its grand neoclassical and Art Deco structures, designed by firms like Palmer and Turner, housed major financial institutions such as HSBC and the Shanghai Club, mirroring Western control over commerce and urban identity (Taylor, 2002).
The Bund’s strategic location and architectural grandeur not only facilitated trade and financial operations but also projected Western authority. Its access to the river was essential for shipping and naval displays, reinforcing the dominance of foreign powers in Shanghai. The area became a symbol of colonial modernity, with its European-style buildings contrasting starkly with traditional Chinese architecture (Horesh, 2007).
In the French Concession, landmarks like the Consulate-General and associated administrative buildings reflected the French cadastre system’s integration into urban governance. This system provided foreign settlers legal authority over land registration and taxation, further cementing their control (Mou, 2015). These administrative landmarks symbolized the consolidation of foreign municipal power, which displaced Chinese governance and perpetuated socio-economic inequalities.
These landmarks, both physical and symbolic, played a dual role in Shanghai’s development. They projected a vision of Western modernity while simultaneously marginalizing the Chinese population through spatial segregation and economic exploitation. This architectural and urban legacy continues to shape perceptions of Shanghai’s treaty port era (Huebner, 1989; Mou, 2015).
Socio-Spatial Divisions
The inequality embedded within Shanghai’s urban fabric can be seen from its socio-spatial divisions caused by top-down planning. Foreign-controlled areas, such as the International Settlements and the French Concession, were designed to prioritize the lifestyles and commercial interests of Western settlers, creating contrasts with the surrounding Chinese neighborhoods (see Figure 3)(Fraser, 1939; Mou, 2015). These divisions were both physical and symbolic, cementing the power dynamics inherent to the treaty port system.
The Bund served as a clear representation of Western dominance and exclusion. This iconic landmark was not merely a commercial hub but also a “littoral space” where imperial ideologies were reflected in the built environment (Taylor, 2002). The juxtaposition of Western modernity with perceived Chinese backwardness created a spatial divide that backed colonial hierarchies. This division was maintained through planning decisions that allocated prime urban spaces to Western interests (Huebner, 1989).
Another infamous representation of this division was the sign in Shanghai’s Huangpu Park that read, “Chinese and Dogs Not Allowed.” The use of the term “dog,” a deeply insulting epithet in Chinese culture, intensified the humiliation, amplified the indignity and symbolized the pervasive discrimination of the time. These deepen the perception of the Chinese as inferior on their own soil. This stark reminder of racial and cultural hierarchies has left a lasting impact on the city’s historical narrative (Bickers, 1998). For over six decades, prior to 1928, the foreign-controlled Shanghai Municipal Council enforced strict regulations that barred most Chinese citizens from entering Huangpu Park (Fraser, 1939).
These divisions had profound socio-economic consequences, deepening inequalities and fostering resentment among the Chinese population. The legacy of segregation, rooted in colonial urban planning practices, continued to shape Shanghai's development long after the treaty port era (Mou, 2015; Huebner, 1989). By inscribing power dynamics into the city’s physical form, the treaty port system transformed Shanghai into a divided metropolis, where space itself became both a marker and a tool of colonial control.
Conclusion
The treaty port era in Shanghai officially concluded in 1949 with the Chinese Communist Party’s (CCP) victory and the establishment of the People’s Republic of China (PRC). After seizing control of Shanghai in May 1949, the CCP began dismantling the colonial and semi-colonial systems that had defined the city’s past. This process included the nationalization of foreign assets, the abolition of imperialist privileges, and the reassertion of Chinese sovereignty over the city’s urban and economic systems (Howlett, 2013; Mou, 2015). These efforts can be seen as a significant transition from foreign-dominated governance to socialist restructuring under CCP leadership, signaling a new chapter in Shanghai’s history.
Shanghai’s evolution into a global financial center during the treaty port era was marked by profound contradictions. The establishment of foreign concessions introduced modern trade practices, financial infrastructures, and urban planning innovations that elevated the city to global prominence (Bickers, 1998; Horesh, 2007). However, these advancements were deeply intertwined with systems of colonial dominance, extraterritorial privileges, and socio-spatial segregation that marginalized the local Chinese population. This duality highlights the extent to which Shanghai’s development was both advanced and constrained by colonial dynamics.
Institutions like the SMC and financial enterprises such as HSBC exemplify the extent to which Western powers entrenched control over Shanghai’s economic and political landscape (Fraser, 1939; Connell, 2003). Simultaneously, socio-spatial divisions institutionalized in the International Settlement and Huangpu Park reinforced racial and cultural hierarchies, exacerbating inequalities and shaping the city’s urban fabric. These structures prioritized foreign interests while relegating the Chinese population to positions of subordination (Taylor, 2002; Mou, 2015).
The broader legacy of these colonial practices extends far beyond Shanghai, offering insights into the enduring impacts of imperialism on global urban development. Colonial systems of governance and urban planning often prioritized foreign dominance over local autonomy, embedding patterns of inequality that persist in modern urban landscapes (Liu, 2014; Urbinati, 1998). The cadastre system in the French Concession, the architectural dominance of Western styles on the Bund, and exclusionary public spaces showcased how urban planning was wielded as a tool of power and segregation (Huebner, 1989; Mou, 2015).
As a case study, Shanghai illustrates the complexities of colonial urbanism, where economic modernization was inextricably linked to social exclusion and spatial inequalities. Understanding this history is essential for critically examining the lasting influence of imperialism on contemporary urban planning. This reflection not only illuminates Shanghai’s transformation during the treaty port era but also emphasizes the importance of addressing the colonial legacies that continue to shape global cities today.
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